Basra city leaders vowed on Thursday not to cooperate with British forces until they received an apology and compensation for a late-night raid by British troops that freed two detained soldiers.
The governor of Iraq's second largest city said a unanimous decision had been taken at a provincial council meeting late on Wednesday and it was now up to British forces to make a move to end the dispute that has fuelled anger towards foreign troops.
"The governing council decided to stop all co-operation with the British until they meet three demands," Governor Mohammed al-Waili told Reuters.
"To apologise for what happened, to guarantee that it does not happen again, and third, to provide some compensation for all the damage they did during the operation," he said, referring to the crushing of jail walls by armoured vehicles.
Waili said he expected the governing council to meet British military officials on Friday or Saturday. Stewart Innes, an official with Britain's consulate in Basra, confirmed negotiations were planned but did not say for when.
"We will enter negotations with the (governing council) in order to reach a solution to our problems," he told reporters.
British troops, meanwhile, confined themselves to their barracks in and around Basra, lowering their profile in an effort to tamp down tensions caused by Monday's raid.
Basra residents said British forces were nowhere to be seen on the city's streets, whereas they would normally be involved in daily joint patrols with the Iraqi police and military.
A British serviceman reached by phone in Basra said troops were staying on base and keeping a deliberately low profile.
He said there were concerns about what would happen on Friday, the Muslim holy day, when preachers at mosques are expected to denounce Britain's actions, roiling public opinion.
The rescue of the two soldiers provoked anti-British protests in Basra on Wednesday. The two men were working undercover when they were approached by Iraqi police, and fired on the police before being arrested.
Britain says it had to rescue the men because they were handed over to a local militia by the Iraqi police after they were detained, but Iraq says they were always in police custody.
British commander Colonel Nick Henderson, who led the operation to free the men, said no raid would have been necessary if Iraqi security forces had just handed over the men.
"We looked inside buildings and we didn't find them and we discovered they were moved elsewhere," he told reporters in Basra. He also denied the pair were carrying explosives with them when they were detained, as Iraq police have suggested.
The incident revealed the fragility of the peace that exists in the city, which has been relatively calm since the US-led invasion, and sparked tensions between London and Baghdad.
Iraqi Prime Minister Ibrahim Jaafari and British Defence Secretary John Reid said after meeting in London on Wednesday, however, that diplomatic ties had not been harmed.
In Baghdad, the US military said a US soldier was killed by a roadside bomb blast, raising to at least 1,910 the number of troops to have died in Iraq since the war began.
The Iraqi commander in charge of a three-week US-Iraqi offensive against Sunni Arab insurgents in the town of Tal Afar said on Thursday the operation was over and had been successful.
General Abdul Aziz Mohammed told a briefing in Baghdad 157 insurgents had been killed and 683 captured during the offensive, while six Iraqi soldiers and six Iraqi police had been killed. His numbers could not be independently confirmed.